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High-Level Seminar on E-

Communications

The development of theICT sector during thecrisis: Internationalcomparisons

Information TechnologyOutlook

Graham Vickery, OECD

Prague16 April 2009

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Outline

What is the impact of the crisis on the ICTsector?

How does it compare with other sectors?

How does the crisis (so far) compare with the

previous ones?

What are economic implications?

What are implications for policy?

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Global overview: ICT supply side

Rapid drop in ICT production linked with Q3-Q4 financial

markets meltdown and global recession. But 2008positive overall due to Q1-Q3 growth. Negative for 2009 Goods: US and Europe down. Asian countries collapsed.

Services: Slowing but not collapsing. Questions for 2009, e.g. India services sourcing

Turbulence with recession: IT investment is very cyclical

(accelerator effect telecommunications and businessCAPEX dropping), personal consumption includingservices hit by wealth effect, unemployment

2007 mid-2008. Growth balanced in OECD countries. E.

Europe and non-OECD have grown much faster ICT markets: Non-OECD countries (Russia, India, China) took 23 of top 25 marketgrowth positions

2000-2007. OECD share down 2003 85% => 2007 78%

Drivers shifted from technology push => commercial anduser-driven applications pull

3

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ICT sector opportunities and threats

Opportunities Threats

Short-

medium-term

Restructuring and efficiencies

ICT budgets hard to compress

Restructuring in other sectors -more use of ICTs / outsourcing

Public sector and emergingeconomies continue to invest

Economic stimulus packages

Declines in R&D and innovation

Decreasing access to capital / VC

IT budgets plunge all sectors / regions

Consumer ICT spending plummets

Fall in demand from emergingeconomies

Longer-term

R&D and innovation priorities

Growth in digital content

Green IT, health & aging drivers

Consolidation / globalisation ofback-office / informationmanagement

Spending on ICT security up

Long term stimulus packages

Dropping R&D / innovation priorities

Prolonged financing problems

Slow development new businessmodels

Slow supply of ICT professionals skills

Business / consumer spending falls

Prolonged infrastructureunderinvestment

Effects on low-cost locations

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Semiconductors falling. Asia gaining shareSemiconductor market by region, 1990-2009. Current USD billion

USD billions, current prices

Source: Information Technology Outlook 2008. 2008 partly estimated, 2009 projected from SIAdata.

550

100

150

200

250

300

Am ericas Japan Europe

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6

U ti l i s a t io n ra

In p e r c e n ta g

Utilisation semiconductor manufacturing

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The challenge: ICT goods plunging with theeconomic crisis Japan

December 1999January 2009. Year-on-year % change, volume index, seasonallyadjusted, 3-month moving average

Source: Information Technology Outlook database.-40

-30

-20

-10

0

10

20

30

40

50

Manufacturin Inform and Comm Electron. eq Electronics part Motor

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but ICT services holding up - JapanYear-on-year % change, production indices, seasonally adjusted, 3-month moving average

Source: Information Technology Outlook database.-5

0

5

10

15

20

IT services Telecomms Computer r

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Collapse is worse in automobiles - FranceDecember 1995 December 2008. Year on year % change, volume index, seasonally

adjusted, 3-month moving average

Source: Information Technology Outlook database.-40

-30

-20

-10

0

10

20

30

40

50

Computer and Office Machinery Electronic components

Chemicals, plastic, rubber Manufacturing

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and in the United States employmentDecember 2001January 2009. Year-on-year % change, number of employees,

seasonally adj. 3-month moving average

Source: Information Technology Outlook database.-20

-15

-10

-5

0

5

10

Manufacturing Computer & electronics Motor vehicl

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Global firms: crisis tough for IT equipmentQuarterly revenue growth (year-on-year) , Top-10 IT equipment

11

Revenues grew most of the year, Q4 decline greater than revenue declines in

2001 for same companies. Overall revenue drops same in both periods.

Source: OECD calculations for top-10 IT equipment firms from OECD top-250 ICT firms.

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Still relatively good for IT services ..

12

Top firms maintained growth through 2008, Q4 slowed a little. Driven by IT

and Business Process Outsourcing (ITO/BPO) but financial market crisis

slowing demand. Outsourcing revenue growth to decline in 2009?

Source: OECD calculations for top-10 IT services firms from OECD top 250 ICT firms.

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.. and software

13

Top software firms high growth Q1-Q2, dropped in Q3-Q4. Driven by

business and consumer investment.

Source: OECD calculations for top 10 software firms from OECD top 250 ICT firms.

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Chinas lead in ICT goods exportsBy region 1996-2007, USD current prices billions

Source: OECD Information Technology Outlook, 2008. 14

0

5 0

1 0 0

1 5 0

2 0 0

2 5 0

3 0 0

3 5 0

1 9 9 1 9 9 1 9 9 1 9 9 2 0 0 2 0 0 2 0 0 2 0 0 2 0 0 2 0 0 2 0 0 2 0 0

I m p o r t s o f IC

U n i t e d S E U-1 5 C h in J a p a K o r e

0

5 0

1 0 0

1 5 0

2 0 0

2 5 0

3 0 0

3 5 0

1 9 9 1 9 9 1 9 9 1 9 9 2 0 0 2 0 0 2 0 0 2 0 0 2 0 0 2 0 0 2 0 0 2 0 0

E x p o r t s o f I C

U n i t e d S E U-1 5 C h in J a p K o r

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Services trade and cross-border investment Trade in ICT services: growing strongly

IT services growing 15-20% p.a.

Ireland by far largest OECD exporter: 2007 USD 21 billion,surplus USD 20 billion

UK, US and Germany each around USD 10 billion exports

India largest world exporter: 2006 USD 30 billion, surplus

USD 27 billion; 2007 and 2008 around USD 40 billion; 2009?

High ICT and comms services share of FDIand M&As: Business cycle collapse Shift to E. Europe and non-OECD. Non-OECD M&A investment

has been up in numbers, less in values

2008 down sharply. 2009 even more

15

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ICT specialists growing rapidly in most countriesShare of ICT specialist occupations in total employment,1995 and 2007

Source: OECD Information Technology Outlook, 2008.

Classifications not harmonised: shares for European and non-European countries are not directly comparable.

16

0

1

2

3

4

5

1995 2007%

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Government ICT policy priorities 2008:The right policies for crisis and recovery?

1. Government online, government as model users

2. Broadband

3. ICT R&D programmes

4. Promoting IT education

5. Technology diffusion to businesses6. Technology diffusion to households

7. Industry-based and on-the-job training

8. General digital content development

9. Public sector information and content

10. ICT innovation support

Source: Information Technology Outlook 2008.